April 9, 2020

Many people do not understand the PPP loan program and are rushing to apply for it because of the apparent loan forgiveness and see it as “FREE MONEY.”

There are reasons you need to reconsider if the program is right for you.

The purpose of the program and loan forgiveness is to provide businesses with the funds to pay their staff to continue to work.  It is a program designed to support the work that needs to get done.

The language on page 16 of the SBA PPP–IFRN FINAL states, “The Administrator believes that finite appropriations and the structure of the Act warrant a requirement that borrowers use a substantial portion of the loan proceeds for payroll costs, consistent with Congress’ overarching goal of keeping workers paid and employed.

When the PPP loan may not make sense:
  • If your employees have been sent home and your business is shut down: You will be paying them for the next eight weeks to do nothing.
  • If your employees are doing nothing productive, and therefore, the loan only increases your debt load.
  • If your employees (and you) may be better off collecting unemployment than staying on payroll.
  • If the loan forgiveness pays for costs you would not have spent if you were shut down.
When the PPP loan makes sense:
  • If you have an operating business and have your employees already working
  • If you are self-employed and the PPP loan can fund your costs to operate
  • If you cannot qualify for unemployment because your business is operating, even at a lower capacity
    (e.g realtors are an example who have deals that may come to fruition)


NOTE:  There are 2 programs under the CARES act that you cannot take advantage of if you take the PPP loan

  • The payroll tax delay that allows you to defer the 6.2% social security tax
  • The employee retention credit equal to 50% of qualified wages

It is clear that you cannot use these programs for the same payroll as the PPP.  It is unclear whether you could use these programs for subsequent payroll.


For more information, please visit our COVID-19 FAQ page and check back regularly

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